The Attorney-General v William Alexander McLennan

IN THE COURT OF APPEAL OF NEW ZEALAND

CA41/00

BETWEEN	THE ATTORNEY-GENERAL
Appellant

AND	WILLIAM ALEXANDER MCLENNAN
First Respondent

AND	WILSON I MCLENNAN, EWEN D MCLENNAN, J MAVIS THORNTON, ELAINE M RANKIN, EILEEN M BRADSTREET AND MAUREEN J FINLAYSON
Second Respondents

Hearing:	21 and 22 November 2000
Coram:	Gault J Keith J Blanchard J
Appearances:	D J White QC and L M Hansen for Appellant R J Katz QC for Respondents
Judgment:	7 December 2000

JUDGMENT OF THE COURT DELIVERED BY BLANCHARD J

Introduction

The Court has before it yet another dispute arising out of the unsatisfactory provisions of s40 of the Public Works Act 1981. The Court was glad to hear from counsel for the Crown that the section is currently under review. In this case the Crown is alleged to have failed to discharge its obligation to offer back land taken compulsorily for a public work and no longer required for any such purpose. Its statutory decisions under s40 are challenged by way of judicial review.
In relevant part s40 reads as follows:
40 Disposal to former owner of land not required for public work-
(1) Where any land held under this or any other Act or in any other manner for any public work-
(a) Is no longer required for that public work; and
(b) Is not required for any other public work; and
(c) Is not required for any exchange under section 105 of this Act-
the chief executive of the department within the meaning of section 2 of the Survey Act 1986 or local authority, as the case may be, shall endeavour to sell the land in accordance with subsection (2) of this section, if that subsection is applicable to that land.
(2) Except as provided in subsection (4) of this section, the chief executive of the department within the meaning of section 2 of the Survey Act 1986 or local authority, unless-
(a) He or it considers that it would be impracticable, unreasonable, or unfair to do so; or
(b) There has been a significant change in the character of the land for the purposes of, or in connection with, the public work for which it was acquired or is held-
shall offer to sell the land by private contract to the person from whom it was acquired or to the successor of that person-
(c) At the current market value of the land as determined by a valuation carried out by a registered valuer; or
(d) If the chief executive of the department within the meaning of section 2 of the Survey Act 1986 or local authority considers it reasonable to do so, at any lesser price.
(2A) If the chief executive of the department within the meaning of section 2 of the Survey Act 1986 or local authority and the offeree are unable to agree on a price following an offer made under subsection (2) of this section, the parties may agree that the price be determined by the Land Valuation Tribunal.
…
(5) For the purposes of this section, the term "successor", in relation to any person, means the person who would have been entitled to the land under the will or intestacy of that person had he owned the land at the date of his death; and, in any case where part of a person's land was acquired or taken, includes the successor in title of that person.

The factual background

The land in question is part of the Papakura Military Camp which had been acquired by the Crown from members of the McLennan family in several parcels from 1924 to 1947. The Government made a decision that the Camp should be closed. In October 1992 the New Zealand Defence Force put its disposal in the hands of the Department of Survey & Land Information (DOSLI). It is DOSLI’s Chief Executive who is referred to in s40. DOSLI was told that the land would be surplus to requirements from January 1993 save for the New Zealand Special Air Service (SAS) compound which would be needed until June 1993.
It was recognised that offers would have to be made to Mr W A McLennan, the first respondent, as successor, in terms of subs(5), of one of the original owners and to the second respondents, also members of the McLennan family, as successors of the other. But there were several complicating features. Three large blocks of land, totalling over 80 hectares, were involved. The block which had to be offered to Mr McLennan was situated between the other two blocks. Substantial buildings had been erected by the Crown, some straddling boundaries. The existence of the buildings also required consideration of subs(2)(b) (whether there had been a significant change of character since the Crown acquired the land). It appeared that to sever the McLennan land from the rest of the Camp in any satisfactory manner would require a sub-divisional consent. This might involve creation of easements. It soon became apparent also that the departure of the SAS from its compound was likely to be delayed. Finally, and perhaps the greatest of the complications, the local authority, the Papakura District Council, had under consideration a possible change to the underlying residential zoning of the land, and it had indicated that it might seek the creation of a reserve over part of it. These matters might substantially affect the market value of the land.
The application of s40 to circumstances of this kind was always likely to give rise to difficulties and contention notwithstanding the best endeavours of the officials concerned with the disposal to reach in good faith an accommodation with the McLennan family.
On 21 April 1993 Mr Riley, a property officer at DOSLI, wrote to Mr McLennan indicating the intention to make an offer under s40. He advised that a valuation was being obtained for this purpose. He said that the Camp had been vacated by all army units except the SAS:
This unit cannot be relocated until around the middle of next year. Therefore its compound of some 8200m² will need to be leased back at a market rental until alternative accommodation is available.
On 16 July 1993 Mr Riley sent offers of sale to the respondents with a covering letter which asked them to refer to his earlier letter. The covering letter stated that the land had yet to be surveyed and title obtained. Settlement would take place within a month of the availability of title.
In a judgment on a preliminary question under r418 of the High Court Rules, delivered on 26 November 1998 and reported as McLennan v Attorney-General [1999] 2 NZLR 469, Smellie J held that:
For the purpose of a valid offer to sell land under s 40(2)(c) of the Public Works Act 1981 the date on which the current market value is to be determined is the date on which the land is validly offered back or at the date on which the valid offer back should have been made, if it is established that there has been a failure to act timeously and with due expedition in all the circumstances of the particular case, in determining to make an endeavour to sell the land in terms of s 40(1) and in determining to offer to sell the land in terms of s 40(2). (p481)

There was no appeal from this ruling which is accordingly binding upon the parties. We would in any event respectfully take the same view. It is important to note, however, that Smellie J was not called upon to apply his ruling to the particular facts.

Paterson J recorded in the substantive High Court judgment now under appeal that, apart from a question about the SAS compound, there was no serious challenge to the Crown’s position that the land became surplus in terms of s40 in January 1993 and that the delay until July 1993 in making the offer did not amount to a failure to act timeously. That was confirmed to us by counsel for the respondents, Mr Katz QC. Therefore the current market value fell to be determined as at July 1993 when Mr Riley sent out the first offers of sale.
DOSLI had in fact approached the question of valuation on the basis later approved by Smellie J. The price offered to Mr McLennan was $2,600,000 plus GST. That to the second respondents was $3,005,000 plus GST. Both figures were assessments by the Crown’s valuer, Colliers Jardine, of current market value at the time the offers were made. Thus, whether or not the Land Valuation Tribunal, acting under s40(2A), ultimately would have confirmed the Colliers Jardine assessment, it is clear that the Crown approached the matter of the time of the valuation correctly, as counsel for the respondents has conceded.
The Crown’s offers were on DOSLI’s then current General Conditions of Sale. The relevant provisions were:
1.0 The Price
1.1The purchase price has been set by valuation at the current market value of the land.
1.2If you consider the purchase price to be incorrect, the price may, with the agreement of the Chief Executive, be determined by the Land Valuation Tribunal in accordance with S.40(2A) Public Works Act 1981.
2.0The Deposit
2.1The offeree shall pay the deposit to the Chief Executive immediately upon execution of this agreement.
2.2The deposit shall be in part payment of the purchase price.
2.3This agreement shall become unconditional upon payment of the deposit.
3.0Possession and Settlement
3.1Possession shall be given and taken on the settlement date when the payment of the full purchase price shall be made.
3.2Settlement shall be one month from acceptance of this offer unless the issue of a Certificate of Title in accordance with Clause 3.5 has not been completed within that time in which case the settlement date shall be within one month following the date on which a search copy of the title is obtainable.
…
4.0Offer to Remain Open
4.1As provided in S.42(1), Public Works Act 1981, this offer remains open and capable of acceptance for forty (40) working days from the date of this offer.
4.2The Chief Executive of the Department of Survey and Land Information has a discretion to extend this period for a further period he considers reasonable. Any application for an extension of the period should be made in writing prior to the offer expiring in terms of Clause 4.1.
…
11.0Time of the Essence
11.1In respect of any deadline stipulated in this agreement the parties acknowledge that time is of the essence viz.
a.payment of deposit (2.1)
b.settlement date (3.2 subject to 3.5)
c.offer to remain open for 40 working days (4.1)
d.application for extension of time (4.2).
…
16.0Special Conditions
The offeree agrees not to disclose the terms and conditions of this offer to anyone other than his professional advisers. Should any unauthorised disclosure by the offeree come to the attention of the offeror he reserves the right to withdraw the offer and to sell pursuant to Section 42 of the Public Works Act 1981.
Clause 4.1 refers to s42(1) in which is to be found the reason for the stipulation that the offer will be open for 40 working days:
42 Disposal in other cases of land not required for public work-
(1) Where-
(a) Any offer to sell land under section 40(2) of this Act has not been accepted within 40 working days or such further period as the chief executive of the department within the meaning of section 2 of the Survey Act 1986 or local authority considers reasonable; or
(b) Any land is no longer required for a public work and subsections (2) and (4) of section 40 of this Act do not apply,-
the chief executive of the department within the meaning of section 2 of the Survey Act 1986 or local authority may-
(c) Cause the land to be offered for sale to the owner of any adjacent land at a price fixed by a registered valuer; or
(d) Cause the land to be offered for sale by public auction, public tender, private treaty, or by public application at a specified price.
…

(A “working day” is defined in s2 of the Public Works Act.)

In August 1993, while the McLennans were considering their response, the Papakura District Council gave public notice of a review of its district scheme and of a proposal to rezone part of the Camp as a reserve. The respondents sought an extension of the 40 day period for acceptance of the offers. DOSLI extended the period until 8 October 1993 but on 1 October 1993 advised the solicitors acting for the respondents that the offers would be put on hold until after the Council’s zoning hearings were completed. The hearing did not take place until 7 July 1994. DOSLI then reported to the solicitors and granted a further extension until 31 August 1994. At the request of the respondents another extension was given until 30 September 1994 to enable the respondents to obtain a valuation. There were then yet further extensions until 14 October and 31 October, on the latter of which the solicitors sent DOSLI by fax two unsigned conditional offers at prices totalling $1.9m. DOSLI advised that these counter-offers were unacceptable.
Further correspondence followed on title and zoning issues. DOSLI gave the respondents until 28 November 1994 to complete their arrangements, stipulating that time was of the essence (see cl.11.1d). The Department offered to include in the contract document a provision under which negotiations to settle the price would not commence until after scheme plan approval of the sub-division had been obtained so that the price would relate to the exact area of land available and account for conditions or encumbrances imposed by the Council. There would then be a negotiation for up to four months and, if agreement on price could not be reached, the parties would apply to the Land Valuation Tribunal to have the price determined. Despite this proposal, the respondents did not signify any acceptance of the Crown’s offers.
On 23 November 1994 Mr Riley wrote to the agent appointed to act on behalf of the respondents, Treasury Property Services Ltd, a letter which was a focus of argument for the respondents on this appeal. In part it reads:
Following our meetings on Tuesday I confirm that we will extend the offers to 28 February 1995 by which time scheme plan approval should be received and the zoning question should be clearer. Upon receipt of scheme plan approval we will review our valuation and make the offerees new offers. They will then have 40 working days in which to respond by either accepting our offers or making counter-offers supported by a valuation report.
At that point the purchase of the land will be unconditional regardless of the final price whether set by agreement or the Land Valuation Tribunal.
Paterson J made a crucial finding of fact, which is not challenged by the respondents in their cross-appeal, that the Crown’s offers lapsed on 28 February 1995 without having been accepted by the respondents. No further extension of time had been sought or granted.
In the view that we take, the subsequent events can be traversed quite quickly. On 3 July 1996 the Crown made a second offer expressed to be under s40. It was a single offer for the three blocks at a price of $6m plus GST and was made to three of the respondents acting as trustees for all of them. This offer was withdrawn on 30 July 1996 without having been accepted.
Colliers Jardine revalued the land at $5,850,000 in August 1996. By that time title was available. DOSLI had been restructured as Land Information New Zealand (LINZ). It made separate offers (the third offer) for a total price of $5,825,000 plus GST. An additional 6000m² of land was included, as it had been in the second offer. No objection seems to have been taken at any time to the inclusion of this additional area. By this time the General Conditions of Contract had changed but it is unnecessary to explore the differences from the form used in 1993. The 40 working day period for acceptance of the third offers was due to expire on 18 October 1996. On the previous day, 17 October, the McLennans submitted counter-offers in the form of agreements in which the purchasers were two companies owned by the family. The total price offered to the Crown was $2,500,000 plus GST. LINZ rejected the counter-offers but extended time for acceptance of the third offers until November 1996 when they lapsed for want of acceptance. Lest there should be any doubt about this, LINZ formally withdrew them on 12 December 1996. Again, the trial Judge has found that there was no acceptance of the third offers and this view is not now subject to challenge.
On 18 December 1997 a fourth set of offers was made by LINZ at a total price of $10,800,000 plus GST. These offers for the first time excluded the SAS compound (now said to be 15.48 hectares) and certain land required by the Papakura District Council for sports fields and reserves (approximately 15 hectares). The fourth offers expired unaccepted on 16 March 1998 after Hammond J declined an application for interim orders in the present proceeding, commenced on 5 March 1998, preventing their expiration.
Finally, on 2 September 1998, LINZ made an offer of the land previously required by the Council for sports fields at a current (1998) market value of $3.1m. The time for acceptance was subsequently extended for 40 working days from 6 October 1998. On 2 December the respondents advised that they accepted the offer for the sports fields “at a price based on a 1993 valuation”. Plainly that was not an unconditional acceptance of the offer. The position of the respondents has consistently been that this offer, like all those preceding it, had to be made by the Crown under s40 on the basis of the current market value in July 1993.

The High Court decision

Paterson J determined that none of the offers made by the Crown was invalid because of the form in which it was made. He rejected arguments for the McLennans that s40 required “a simple agreement containing price, parties and property and nothing more”; that the Crown was not entitled to stipulate for a 10% deposit and make any contract conditional upon its payment; and that the Crown could not under s40 require settlement within one month of availability of title, with time being of the essence. The Judge accepted the evidence of an expert witness for the respondents, Mr Eades, that what he called a “basic terms contract” – an open contract – is unusual in New Zealand practice, saying that it was “difficult to envisage that the legislature intended the Crown to use a type of contract which led to doubts, uncertainties, disadvantages and a greater potential to litigation”. The Judge found that s40 enabled the Crown to impose ancillary and incidental conditions, as well as reasonable conditions which are normally included in agreements for sale “provided such conditions were not an impediment to the plaintiffs accepting the offers”. He found that in practice there had been no such impediment.
Having concluded that the first offers lapsed as a matter of law on 28 February 1995, Paterson J nevertheless took the view that the subsequent offers, at least in part, included land which was still being offered to the McLennans under s40. But because the second and subsequent offers were made at prices other than the July 1993 valuation, he found that those offers were invalid - that they did not discharge the continuing s40 obligations of the Crown. However, he said, there was no such obligation in respect of the SAS compound or in respect of certain land which had undergone a significant change in character in terms of subs(2)(b) of s40. He was not in a position to determine the precise area of these portions of the Camp.
The Judge also decided that the respondents had the right to acquire the sports fields on the basis of the offer made by the Crown in September 1998, but at their current market valuation as at July 1993.
Declarations were made in the High Court as follows:
(a)The Crown has an obligation to sell to the plaintiffs at a price equivalent to the current market valuation at July 1993, those portions of land which were included in the offers made by DOSLI to the plaintiffs on 16 July 1993 with the exclusion therefrom of:
(i)The SAS compound which is still required for a public work; and
(ii)Land which the Commissioner of Crown Lands in his letter to Mr Riley on 7 January 1992 had determined should be excluded on the ground that there had been a significant change in the character of that land.
(b)As a consequence of declaration (a) the Crown is obliged to sell to the second plaintiffs at a price equivalent to the current market valuation at July 1993 that portion of land comprising 13.5 hectares which was offered by LINZ to the second plaintiffs in the offer of 2 September 1998.

The issues

The essential issues in this Court are:
Whether the first offers of July 1993 were validly made. In their cross-appeal the respondents renewed their argument that s40 did not permit the Crown to stipulate for conditions – that the offers had to be made on the basis of an open contract. During oral argument Mr Katz also submitted that they did not meet the requirements of s40 because at no stage during their continuance could the Crown have delivered unencumbered title.
If the first offers were valid and, as the Judge found, lapsed on 28 February 1995, whether they discharged the Crown’s s40 obligation. In its appeal the Crown contended that despite reference in subsequent offers to s40, it was either not acting pursuant to that section, which it had already complied with, or, if it was, that in the circumstances the offer prices could be fixed on the basis of market valuation at the time of those offers.
If the Crown was obliged to make a further offer or offers after February 1995, whether it was bound to include the SAS compound and any land which had undergone a significant change of character (both of which had actually been included in the July 1993 offers). These matters were raised in the cross-appeal.

Validity of the July 1993 offers

Mr Katz’s principal argument for the invalidity in terms of s40 of the July 1993 offers was the inclusion of the General Conditions of Contract. He endeavoured to support his submission that open contract terms were required by the section by referring to New Zealand and English authorities, but none of them addresses a similar statutory context or was decided upon facts comparable with the present case. In the end, the respondents’ argument was simply that s40 is intended to put persons from whom land has been taken for a public work and their successors in a special position. Their position was said by counsel to be sui generis which it would be wrong to equate to the normal negotiating situation or contractual regime between an ordinary vendor and purchaser. Once the statutory pre-conditions are met the persons entitled to an offer-back have a vested right (Attorney-General v Horton [1999] 2 NZLR 257, 262 per Lord Hoffman). Counsel said this was a right to receive an offer simpliciter, “no more and no less”. Mr Katz drew attention to a dictum of Fisher J, in Dean v Auckland City Council (High Court, Auckland Registry, CP663/88, 15 June 1990), whose words were repeated by Hammond J in Deane v Attorney-General [1997] 2 NZLR 180, 192:
Here there was the unique statutory setting that pursuant to s 40 of the Public Works Act the defendant was required to offer the land to the plaintiffs at no more than current market value. The statute gave the defendant no right to stipulate for a deposit.
Mr Katz drew attention also to s43 of the Public Works Act:
43 Land may be sold on deferred payments-
Any land held for a public work and proposed to be sold pursuant to section 40 or section 42 of this Act may be sold on deferred payments extending over such period and on such terms and conditions, including a deposit, as the Minister or the local authority, as the case may be, may determine.

He said that this provision showed that where the legislature intended the Crown to have power to impose terms and conditions, it said so directly.

Acceptance of this argument would, in our view, produce a result so inconvenient and so out of step with normal New Zealand conveyancing practices that it cannot have been what Parliament meant. Nor do the words of s40 require it. All s40 requires is the making of an offer to sell “by private contract”. That would, on its face, seem to mean a private contract arrived at pursuant to an offer made in good faith on usual terms and conditions. If the Crown is restricted as the respondents suggest when acting under s40, we consider that it would have to be taken to be similarly restricted when selling by any of the means permitted under s42, including public auction and public tender, which would be an extraordinary state of affairs. We can see no sensible distinction between “private contract” in s40 and “private treaty” in s42. This usage of the word “treaty” connotes a contract. If the restriction exists under one, it would exist under the other.
As Mr Eades said in his evidence, what he called a basic terms contract might leave the parties and their advisors in doubt as to their precise rights and obligations in a large number of areas, and inadequately protected in various respects. He said that basic terms contracts are “certainly unusual in New Zealand practice”.
As to s43, it simply empowers a sale on deferred payments, confirming the Crown’s undoubted common law power to make a sale on that basis, and it enables the Minister to set limits upon what the Chief Executive may do by way of granting deferment of payment of the price. It is not in our view to be inferred from s43 that terms and conditions cannot be imposed under s40, or, for that matter, under s42, to which it also refers.
Save in one respect, the respondents’ case in this Court was not that the terms of the General Conditions of Contract used in the 1993 offers were in themselves unreasonable but that there was no power to include them. This was a view not expressed prior to the commencement of the proceeding in 1998. For the reasons we have given, and in agreement with Paterson J, we reject that view. The Crown has the power to include in s40 offers terms and conditions that are reasonable, and the terms included in the 1993 offers were reasonable in the circumstances. The primary concentration of the respondents’ argument was upon cl.2.0 relating to the deposit and it is therefore proper to add that the Crown’s stipulation for a 10% deposit was, upon the evidence and in the professional experience of members of the Court, entirely normal and proper. It is usual New Zealand practice also to require that it must be paid immediately and to empower cancellation if payment is not forthcoming. The deposit clause in this case differs from that often encountered but is to the same practical effect. It is to be noted that the respondents’ counter-offer documents contained provision for a deposit.
The only special condition which might plausibly have been said by the respondents to be unreasonable, in the sense that it might possibly have had the potential to frustrate their efforts to come to terms with the Crown, was cl.16 under which confidentiality was required and the Crown reserved the right to withdraw the offer if there were disclosure of its terms. (The Crown’s explanation for this clause was that it did not wish to risk prejudice to its efforts to sell to another party if its offer under s40 was not accepted.) It is significant, however, that this condition was mentioned only in passing in written submissions in this Court and not at all in oral argument. No objection was taken to it by the respondents or their advisors during the currency of the offers. It seems to have had no frustrating effect at all; the respondents have not said that it actually inhibited their efforts to acquire the land. In the circumstances of this case we agree with the Judge that it was not shown to have been an unreasonable stipulation.
The second point for the respondents, belatedly made, was that the Crown was not complying with s40 in making the first offers and afterwards allowing them to lapse because it was unable at the relevant times to convey unencumbered title. (The title problems were not resolved until 1996, although it was not suggested that in this respect the Crown was at fault.) Mr White QC very reasonably objected that this suggestion had not been the subject of any pleading and consequently no attention had been paid to it in the preparation of the evidence. The argument had not been addressed to the Judge and was being raised for the first time in this Court in oral argument.
The argument seemed in fact to emerge from a submission which, in a collateral way, attempted to impugn the Judge’s finding, not contested by the notice of cross-appeal, that the first offers had lapsed without acceptance by the respondents. The respondents’ position seemed to be that the Crown should not have allowed the lapsing to occur and had done so as a means of avoiding its own title difficulties. The argument had some relevance also to the contention that after 28 February 1995 the s40 obligation to the respondents continued.
Even if we thought that this new argument had any possible legal merit we would not be disposed to allow the respondents to rely upon it for the first time on this appeal. If it had been pleaded, the Crown might have been able to supply a factual response which is not presently available. But the argument is fundamentally flawed and, as Mr White pointed out, if it were sound it would be self-defeating for the respondents.
The argument is unsound because, as is the position at common law, there is nothing in s40 preventing the Crown, provided it acts in good faith, from making an offer-back notwithstanding that it might be in difficulty in delivering unencumbered title to the subject land. On the contrary, the section does not relieve the Crown from the obligation to make an offer-back in such circumstances where land has become surplus. It might well have been desirable for the legislature to afford the Crown some protection against such a title situation as existed in this case, but it did not do so in s40. The Crown was required to proceed in July 1993 to make offers under the section whether or not it could resolve its title problems. If the offers had been accepted, the Crown would then have been obliged to take steps to pass good title with all reasonable speed.
It is not suggested that there was any lack of good faith on the part of the Crown; indeed, the criticism may be made that it perhaps went too far in trying to reach an accommodation with the respondents who, it appears, were not themselves willing to make a commitment, even at 1993 values, at least until 1998.
If the respondents’ new argument were sound, however, the result must be that they could no longer contend that the offers subsequent to 28 February 1995 should have been made at July 1993 values. Seemingly, on that assumption, the obligation to make an offer would not in such circumstances arise until title was immediately available. That was in 1996 when offers were actually made on the basis of then current market values. As the Judge found, those offers were not accepted.
We conclude that the July 1993 offers to the respondents fully complied with s40. We should record that Mr Katz, for reasons which will be apparent, entirely disclaimed any notion that those offers might have been invalid because they included some additional land which the Crown might not have been obliged to offer back under s40.

A continuing obligation?

The next question, and one which is now determinative of the case, is whether upon the (unchallenged) lapsing of the first offers the Crown was under any further s40 obligation and, if not, whether in expressing further offers to be pursuant to that section, it took upon itself an obligation to comply with the section, in particular by making such further offers at a July 1993 valuation.
It has to be said that the judgment below does not clearly articulate why the Judge considered that the Crown remained under a s40 obligation after the first offers lapsed. It may have been because he considered that the Crown must, in law as well as in the way it expressed itself, have been relying on s40, and therefore revived its obligations under s40 by, in effect, extending the time available for the respondents to accept the offers. Certainly the officials appear to have believed that they were relying on s40. One matter is clear, however: that they saw themselves as transmitting new offers, not reinstating or extending the July 1993 offers. The subsequent offers were at different prices, to different offerees and, in some cases, there were differences in the subject matter. Furthermore, the terms and conditions changed from time to time.
It seems to us that the Crown had fully discharged its s40 obligation when the unaccepted first offers lapsed some 19 months after they were first made. The Crown had perhaps committed itself to make new offers, but that was not in our view something required by s40, and the Crown in any event fulfilled that commitment.
The respondents had already been given the opportunity to purchase called for by the statute. It may be that the circumstances recorded in para [4] above were unfortunate for them (and for the Crown). Their reluctance to commit themselves may have been understandable, although they always had the protection of the Crown’s agreement (under cl.4.2) to refer the question of price to the Land Valuation Tribunal. Section 40, read with s42, obliges the Crown to allow no more than 40 working days for any acceptance. Any extension is at the discretion of the Chief Executive – as he or she “considers reasonable” – and it has not been suggested that the Chief Executive did not act reasonably. Section 40 is a blunt instrument. It does not give an offeree, faced with a difficult judgment call on the acceptability of an offer for land whose value may be in the process of changing, the ability to require the Crown to grant further time until there is some clarification of the position. In fact the Crown did generously grant extensions (at one stage even putting the offers “on hold” for some months) and it gave plenty of warning that the final extension would expire on 28 February 1995. We were unpersuaded by Mr Katz’s attempt to read down Mr Riley’s letter of 23 November 1994 (para [15] above) in this latter respect.
Since, then, the Crown had by 28 February 1995 entirely discharged its s40 obligation, it would have been entitled thereafter to proceed to endeavour to dispose of the surplus land under s42 or the Crown’s general power of sale. It seems to us that this is what actually occurred, notwithstanding that reference continued to be made by officials to s40. In their written submissions the respondents appeared to be arguing that the Crown’s subsequent offers were not in the circumstances authorised by s42 because, reading the provision sequentially, an offer had to be made to adjacent owners before it could be made to anyone else, including themselves. We would not necessarily read s42(1) in that way but, in any event, such an objection could be taken only by an adjacent owner and none has been forthcoming. In fact, much of the land which abutted the three blocks was also vested in the Crown.
In making the subsequent offers the Crown did not contractually commit itself to strict (voluntary) adherence to the terms of s40, particularly to the manner of setting the price. That is apparent from the fact that the Crown was expressly using then current values in making the subsequent offers. And if, which we doubt, the Crown could in this way have obligated itself to adhere to s40, the situation was then so different from the normal, and beyond anything contemplated by Smellie J’s ruling, that we consider that the appropriate “current market value” would have been that which pertained when the subsequent offers were made. The Crown could not, having validly made offers in fulfilment of its s40 obligation, and having validly allowed them to lapse, be required to backdate any further offers. The circumstances in which any current market value was then to be established must have included the failure of the offerees to take up the earlier offers. To determine otherwise would give the respondents the benefit of a value fixed in light of the 1993 contingencies but with the advantage of being able to wait until the doubts had actually been determined one way or another.
In summary, we conclude that the Crown was not obliged to make any offers after the lapsing of the July 1993 offers. Those that were made were not accepted. The making of them did not revive the Crown’s s40 obligation. It has no such obligation to the respondents at the present time. The Judge therefore erred in making his first declaration.
He also erred in making the second declaration relating to the sports fields. If that offer, made on 2 September 1998, had been unconditionally accepted, the price would have been the 1998 price, as established by the Land Valuation Tribunal. It was not the 1993 price, as the respondents contended. The respondents’ acceptance was conditional upon a 1993 price. It amounted, therefore, to a counter-offer which the Crown did not accept. The 1998 transaction has accordingly not given rise to any contract. The Crown has no obligations to the respondents in respect of the sports fields.

SAS compound/ change of character of land

In view of the conclusions reached above, neither of these matters requires to be resolved and our views can be shortly stated.
In our opinion the SAS land was never within s40. It has continued to be occupied by an army unit throughout. It has never become “no longer required” for a public work. In July 1993, by his reference back to his letter of 24 April 1993 (para [b] above), Mr Riley made it clear that at the time when the Crown was making its first offers the SAS compound was still in use. It was included in the offer-back for convenience, not because s40 required that to be done. The Crown was not obliged to include it in future offers. Until and unless the SAS vacates and the Crown has no use for that piece of land, no offer-back need be made in respect of it, although it would remain open to the Crown, if it wished to do so, to offer it to the respondents on a sale and lease-back basis.
There has been a dispute over whether the Crown is correct in asserting that part of the Camp had undergone a significant change of character. Paterson J recorded that the Chief Executive had proceeded on that basis. It is unnecessary to go into the question of whether the Chief Executive was right to do so. All that needs to be said is that if the state of any of the land in fact brings it within subs(2)(b), the Crown is not obliged to offer it again now that the offers which did include it have lapsed.

Result

We allow the Crown’s appeal, dismiss the cross-appeal and set aside the declarations made by the High Court. The respondents must pay the appellant’s costs in this Court in the sum of $10,000 together with reasonable disbursements, to be fixed if necessary by the Registrar.

Solicitors
Crown Law Office, Wellington for Appellant
Lewis’, Cambridge for Respondents

[2000] NZCA 376

7 December 2000